Cooperative Advertising Strategies in Search Engine Advertising

Abstract

In search engine advertising (SEA), besides intense competition among advertisers (e.g., many retailers), there is channel coordination between retailers and manufacturers. This research attempts to investigate cooperative advertising in the SEA context, by considering a decision scenario including one retailer and one manufacturer, where the manufacturer carries out her own campaigns, and in the meanwhile, shares a fixed percentage (i.e., the participation rate) of the retailer's spending. Our model incorporates the dynamic quality score to study its effect on cooperative SEA strategies. Moreover, we provide a feedback Stackelberg solution for optimal cooperative strategies for the retailer and the manufacturer. Furthermore, we conduct computational experiments to evaluate our model and make sensitivity analysis with respect to the quality score and the participation rate. Experimental results generate normative findings providing critical insights for cooperative advertising participants in SEA.